Apollo ups bid for easyJet at 715p, surpassing Castlelake

Apollo Global submitted a 715p-per-share cash bid for easyJet, topping an earlier approach from Castlelake and triggering a bidding contest for the U.K. low-cost carrier. The offer values easyJet at about £5.7 billion ($7.7 billion). The airline’s shares closed Thursday at 588p, below the week’s high of 621p.

In a statement, easyJet said: “Given that Apollo’s £5.7 billion ($7.7 billion) bid is superior, easyJet is no longer minded to recommend the Castlelake proposal. The financial terms of the proposed cash offer are at a level that it would be minded to recommend to easyJet shareholders.”

Apollo, a U.S. private equity firm with more than $1 trillion in assets under management, raised its proposal above Castlelake’s earlier offer, which had been reported at about $7.3 billion. Castlelake manages roughly $38 billion. The easyJet board indicated the Apollo terms are at a level it would be minded to recommend, while the process remains open to change.

Castlelake could choose to increase its bid, withdraw, or see a third party submit a rival proposal. Any new offers would affect easyJet’s share price and returns for shareholders.

Potential buyers face regulatory and practical requirements before a deal can close. U.K. merger rules typically require a buyer of a domestic airline to secure a local partner. Regulators may also scrutinise leveraged buyouts for their likely impact on company debt levels and jobs; such issues are commonly addressed in talks with authorities and through commitments from bidders.

easyJet’s recent results present mixed metrics for potential acquirers. The airline reported a pre-tax loss of £552 million for the latest quarter while revenue rose 10%. Operating costs increased about 5%, driven in part by higher jet fuel prices. At the quarter end the group held around £4.7 billion of liquidity, including £434 million of net cash.

Shareholders and market participants will watch for a formal response from Castlelake, any revised offers and the opening of a window for competing proposals. Any final transaction will require shareholder approval and regulatory clearance before completion.